William Leggett on the separation of bank and state (1837)

The Jacksonian era journalist William Leggett (1801-1839) was the intellectual leader of the laissez-faire wing of Jacksonian democrats. He believed that the “separation of bank and state” was an essential part of “democratic” economic policy:

In the complete separation of government from the bank and credit system consists the chief hope of renovating our prosperity, and restoring to the people those equal rights, which have so long been exposed to the grossest violations. Leave credit to its own laws. It is an affair between man and man, which does not need special government protection and regulation. Leave banking to be conducted on the same footing with any other private business, and leave the banker to be trusted or not, precisely as he shall have means to satisfy those who deal with him of his responsibility and integrity. All this is a matter for men to manage with each other in the transaction of private affairs.

Plaindealer, July 22, 1837

The Evening Post a day or two since remarked that, “there never was a more popular catch word than the separation of bank and state. It is a phrase full of democratick meaning; it is musick to the ears of the people. It is a phrase which will never be laid aside till all that it imports is fully realized. On this feeling in the people the administration may confidently rely, sure that if they trust to it they will be triumphantly sustained.” Whatever merit there may be in having originated this phrase, we believe may be justly claimed by this journal. And not the phrase only, but the important measure which it implies, has been urged on the attention of our readers with a frequency which we might fear would weary them, were it not for the vast importance of the subject. The separation of bank and state, and the emancipation of credit from legislative fetters are the two great objects for which the real democracy are contending. “Divorce of bank and state,” and “freedom to trade,” are phrases which deserve conspicuous and continual insertion in every democratick newspaper. They should constitute our “watchword and reply” in the coming contest.

In the complete separation of government from the bank and credit system consists the chief hope of renovating our prosperity, and restoring to the people those equal rights, which have so long been exposed to the grossest violations. Leave credit to its own laws. It is an affair between man and man, which does not need special government protection and regulation. Leave banking to be conducted on the same footing with any other private business, and leave the banker to be trusted or not, precisely as he shall have means to satisfy those who deal with him of his responsibility and integrity. All this is a matter for men to manage with each other in the transaction of private affairs. But the part which the government shall act in regard to banking and credit is a political matter, to be decided by the voice of communities through the constituted channels of suffrage. There are two principles at war on the subject. One of these is the principle of aristocracy, the other the principle of democracy. The first boasts of the vast benefits of a regulated paper currency, and asks the federal government to institute a national bank “to regulate the currency and exchanges,” or, in other words, to regulate the price of the labourer’s toil, and enable the rich to grow richer by impoverishing the poor. The principle of democracy, on the other hand, asks only for equal rights. It asks only that the government shall confine itself to the fewest possible objects compatible with publick order, leaving all other things to be regulated by unfettered enterprise and competition. It asks, in short, for free trade, and the divorce of bank and state.

About this Quotation:

If Alice in Wonderland were to fall down a rabbit hole and appear in America in 1837 she would have seen another good example of a place where big is small and words can mean whatever you want them to mean. In this case she would have come across a nearly unimaginable Democratic Party which advocated laissez-faire economic policies. Leggett makes a distinction between two types of government, one which is based upon “the principle of aristocracy” and the other based upon “the principle of democracy”. The “aristocrats” want a national bank which issues paper money which will benefit the wealthy and a government which will manipulate prices which will harm the average worker. Economic policies based up the principle of democracy would treat everybody equally and “leav(e) all other things to be regulated by unfettered enterprise and competition.” Thus, in Leggett’s mind there was an intimate connection between “free trade” and the “separation of bank and state”.